Cut in corporation tax expected tomorrow

Chancellor George Osborne is expected to announce a cut in corporation tax
rates during a speech at the CBI tomorrow (Wednesday).

He revealed at a press conference yesterday that an announcement was imminent
and refused to elaborate on his policy ahead of the statement.

A cut to the rates has been long expected after previous Tory statements that
the party would slash the rate to 25% from the current level of 28%.

Corporation tax was expected to raise £42bn in 2010-11, according to the
Budget Red Book produced during Labour’s last Budget before losing office in
March.

However, what is not yet clear is what will happen to the capital allowances
regime in order to pay for the cut. The Tories have suggested they need reform.

Currently the main allowances are available for plant and machinery,
industrial buildings and research and development. However, others are also
available capital expenditure on ships, mining, flat conversions and
agricultural buildings. There are also allowances for work on business premises
that have been vacant for more than a year or are located in disadvantaged
areas.

The Tories have argued that the system of allowances is too complex and
provides little benefit. Proponents say that some of the allowances are
extremely popular.